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LPS to Pay $35 Million in Criminal Fines and Forfeitures for Mortgage Fraud

Lender Processing Services Inc., the Florida-based firm that denied knowledge of a years-long mortgage fraud scheme carried out by its primary document processor, DocX, will have to pay $35 million in criminal penalties and forfeiture, the U.S. Justice Department has announced.

Our Miami foreclosure defense attorneys know this comes months after the November federal guilty plea of DocX chief executive Lorraine Brown on charges of mail and wire fraud. She faces up to five years in prison on those charges when she is sentenced in April. Earlier this month, she also pleaded guilty to racketeering charges in Michigan, where she faces up to 20 years in prison.

DocX was a wholly owned subsidiary of LPS, although LPS executives continue to maintain that they had no idea DocX was doctoring some 1 million mortgage documents over the course of six years. These records were fraudulently signed and notarized at a break-necking pace, with some of instances being so obviously blatant, it makes LPS’ denials quite hard to believe.

While Brown may be facing prison time, it appears she may be the only one. The LPS settlement doesn’t involve any personal responsibility for those involved. A $35 million settlement may sound like a lot. But consider that LPS rakes in billions of dollars – quarterly. This is chump change and a mere slap on the wrist, considering the wide scope of the damage inflicted on homeowners and communities nationwide.

In addition to making this payment, LPS will also be required to enact a series of changes to its internal policies. For starters, DocX has since been shuttered, with those in high level posts having been dismissed.

It has re-executed and re-filed the mortgage assignments that were previously under DocX’s control.

It has also hired an independent consultant to review its document practices (though we’ve seen how well “independent” contractors have worked out in previous instances). This same reviewer will be responsible for determining a plan to reimburse borrowers or mortgage servicers who suffered financial damage as a result of DocX’s robo-signing fraud.

The Justice Department said it entered a non-prosecution agreement with LPS, saying the firm conducted an immediate and thorough internal investigation of the fraud and reported all those findings to the government. However, it’s worth noting that the internal investigation wasn’t launched until the government pointed out that it was happening.

The Justice Department contends that Brown and others took active steps to conceal what was going on to administrators at LPS, as well as the company’s auditors. However, we would posit that the timeline on which these documents were being produced was never logically realistic if procedures were being carried out in adherence to the law. LPS should have known that.

The settlement was reached as part of Obama’s Financial Fraud Enforcement Task Force. For the sake of the homeowners who are continuing to suffer due to wrongful foreclosure, we sincerely hope the task force takes a harder line in these cases in the future.

If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Mortgage Wars,” discussing foreclosure topics that matter to YOU.

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